http www bized ac uk Introduction to Economics
http: //www. bized. ac. uk Introduction to Economics The Economic Problem Opportunity Cost Production Possibility Frontiers Copyright 2003 – Biz/ed
http: //www. bized. ac. uk The Economic Problem • Unlimited Wants • Scarce Resources – Land, Labour, Capital • Resource Use • Choices Copyright 2003 – Biz/ed
http: //www. bized. ac. uk The Economic Problem • What goods and services should an economy produce? – should the emphasis be on agriculture, manufacturing or services, should it be on sport and leisure or housing? • How should goods and services be produced? – labour intensive, land intensive, capital intensive? Efficiency? • Who should get the goods and services produced? – even distribution? more for the rich? for those who work hard? Copyright 2003 – Biz/ed
http: //www. bized. ac. uk Opportunity Cost • Definition – the cost expressed in terms of the next best alternative sacrificed • Helps us view the true cost of decision making • Implies valuing different choices Copyright 2003 – Biz/ed
http: //www. bized. ac. uk Production Possibility Frontiers • Show the different combinations of goods and services that can be produced with a given amount of resources • No ‘ideal’ point on the curve • Any point inside the curve – suggests resources are not being utilised efficiently • Any point outside the curve – not attainable with the current level of resources • Useful to demonstrate economic growth and opportunity cost Copyright 2003 – Biz/ed
http: //www. bized. ac. uk Capital Production Possibility Frontiers Goods Yo A B Y 1 Xo X 1 Consumer Goods Copyright 2003 – Biz/ed
http: //www. bized. ac. uk Production Possibility Frontiers Capital Goods Y 1 Yo C . A B Xo X 1 Consumer Goods Copyright 2003 – Biz/ed
http: //www. bized. ac. uk Positive and Normative Economics • Health care can be improved with more tax funding • Pollution control is effective through a system of fines • Society ought to provide homes for all • Any strategy aimed at reducing factory closures in deprived areas would be helpful • Positive Statements: – Capable of being verified or refuted by resorting to fact or further investigation • Normative Statements: – Contains a value judgement which cannot be verified by resort to investigation or research Copyright 2003 – Biz/ed
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